Tax and skills – an OECD report

Creating incentives to invest in skills across society is a key component in lifting wage and productivity levels across OECD countries. At the same time, increased levels of skills investment will be necessary to ensure that future economic growth will be inclusive and sustainable. This study demonstrates that tax and spending policies need to be designed in a coherent manner in order to encourage efficient and equitable skills investments.

The study provides the following key insights:

Investments in skills produce a sound return for students through the higher wages and salaries that can be earned with improved skills.

Investments in skills are a good investment for government, with every dollar invested being more than fully repaid in additional tax revenues on average

Government investments in skills and education should attempt to ensure an efficient and equitable sharing of the costs and returns between governments and individuals. In particular, it is important for policymakers to constantly re-evaluate the means and extent of support provided by governments to ensure that the incentives for further skills investments remain sufficient for both governments and individuals.

The most efficient and equitable ways that governments can support skills investments are through direct government spending and by subsidising student loans..

The costs of failing to invest in skills will have consequences in the years ahead. A failure to invest in skills today will not only impede the economic participation of individuals and restrain productivity growth, but will also reduce future expected tax revenues, increase future expected levels of social expenditure, and jeopardise future inclusive economic growth prospects.